Why banks & agents value your home differently

Thursday 03 Jan 2019

Banks and agents may have a slightly different opinion of the value of your home.  A bank valuation is generally more conservative.   If your home is or will be mortgaged, your bank will usually need to value it. This gives the lender confidence your asset offers enough security against the borrowed amount if, for some reason, you cannot pay your mortgage and the bank must sell the property to recoup its debt.

It is therefore unsurprising that a bank valuation will usually be conservative, sometimes 10%-20% less than the current selling prices of comparable homes.

The selling agent’s price appraisal
Real estate agents are usually asked to assess the market value of your property to help a vendor decide who to engage to sell their home.

Before being chosen to act on a vendor’s behalf an agent will typically inspect the home and research comparable sales in the local suburb or town before producing written feedback and a sale price estimation such as “between $X and $X” or “from $X”.

This price guide is useful to a vendor when deciding what price to advertise.

The sale price
Regardless of whether the property is sold via private sale or auction, the price the successful buyer is prepared to pay, and the vendor is willing to accept, on the day the contract is signed is the property’s legally binding sale price.

Hot markets, high demand in certain areas and a big turnout on auction day can all have an effect on the final sale price for a property.

The final sale price of a property can depend on a number of factors, including a big turnout on auction day.

The local council's valuation
Every year when a property owner gets their local municipal rates bill they will see on the notice a Capital Improved Value (CIV), site value, net annual value (NAV) and/or gross rental value (GRV). These figures are calculated using varied methodology including comparable sales data and the bi-annual figures from the State Valuer-General’s offices.

Councils and water and fire authorities use these figures to work out how much homeowners owe them for using their infrastructure and services.

The homeowners' price
Every property owner will have a ‘wish price’ in their minds when they come to sell.  They usually also have a ‘this-is-the-lowest-I-will-go’ price and usually both of these price points are based on a home’s location, aspect and features, but sometimes vendor price expectations are also influenced by emotion rather than facts.

Every property owner will have a wish price in their minds when they come to sell.

In the end, the market will usually decide a property’s value by what a buyer is willing to pay for it at auction or through private treaty sale.